While the ongoing market churn can be stressful, it also presents a fantastic opportunity for investors to pick up solid stocks to buy on the dip. Even some of the best investors in the world, including Warren Buffett, have been on a buying spree throughout 2022 as share prices slumped. In fact, Buffett has done more buying of stocks over the past year than at anytime since the Great Recession, spending almost $66 billion on stocks in the first nine months of the year. Following on the Oracle of Omaha’s lead, here are seven stocks to buy on the dip as the S&P 500 continues to falter.
|CMG||Chipotle Mexican Grill||$1,487.53|
Stocks to Buy on the Dip: General Motors (GM)
There’s a very compelling case to be made for buying shares of General Motors (NYSE:GM) on the dip. For one, the nuts and bolts of the stock are attractive. Tw0, the share price is down 36% on the year and trading at $37.62, about the same level it was at in 2019 before the pandemic. A price-earnings ratio of 6.39 is rock bottom for a company of GM’s size. And while a quarterly dividend payment of nine cents per share isn’t overly generous, it is better than nothing.
General Motors has traveled a bumpy road over the past year. Supply chain problems made it difficult for the company to source needed parts and complete vehicles on time, and ongoing Covid-19 lockdowns in China dented its global sales. For this year’s third quarter, GM reported revenue of $41.89 billion, which was slightly below Wall Street forecasts for $42.22 billion. However, its earnings per share of $2.25 were well ahead of analyst calls for $1.88.
Despite the rough road, General Motors continues to plow ahead with its company-wide conversion to electric vehicles. In fact, GM chief executive officer (CEO) Mary Barra recently said that the company now expects electric vehicle profits to be comparable to gas vehicle profits by 2025, years ahead of schedule. In all, GM is investing $35 billion to electrify its fleet of cars, trucks and SUVs. It makes our list of top stocks to buy on the dip.
Stocks to Buy on the Dip: Amazon (AMZN)
Another one of the top stocks to buy on the dip is Amazon (NASDAQ:AMZN), which Goldman Sachs (NYSE:GS) just named as one of its favorite stocks for 2023. In fact, analysts at the firm see the Seattle-based e-commerce giant turning a corner in the year ahead after a difficult 2022. A year where it was forced to right size its operations coming out of the pandemic, layoff staff, and cancel several projects that were in development.
If Goldman’s bullish forecast proves true, investors would be wise to buy the dip in AMZN stock now while it is comparatively cheap. The company’s share price is down 45% this year. The depreciation, combined with a 20-for-1 stock split this past June, has Amazon’s stock trading for $88 a share, its most affordable level in more than a decade. A year ago, the stock was trading near $2,000.
While the price-earnings ratio of just under 82 is a bit rich and Amazon doesn’t pay a dividend, the stock is still worth picking up at its current price given its long-term earnings potential and the fact that it controls nearly half (50%) of the U.S. e-commerce market. Second place eBay (NASDAQ:EBAY) has a 6.6% market share.
Stocks to Buy on the Dip: Moderna (MRNA)
Just recently, Moderna (NASDAQ:MRNA) jumped nearly 20% in a single trading day. All on news its experimental cancer vaccine reduced the recurrence of melanoma (a deadly form of skin cancer) by an impressive 44%. Moderna’s vaccine was used in combination with pharmaceutical company Merck & Co.’s (NYSE:MRK) cancer immunotherapy Keytruda.
The cancer vaccine’s promising results in a clinical trial help to answer the big question that has been hanging over Moderna and its stock all year: what’s next for the Boston-based company after its breakthrough Covid-19 vaccine? Moderna has forecast that it will sell $18 billion to $19 billion of its Covid-19 vaccine in 2022, which is great. But the knock on the company, until now, was that it had a thin pipeline. The Covid-19 shot was the first medication Moderna successfully commercialized.
The uncertainty has weighed on MRNA stock, pulling it down 53% from a peak of just under $450 a share reached in Sept. 2021. Now at $207 a share and trading at 7.5x earnings, Moderna’s stock is attractively valued. In addition, if its new cancer vaccine takes off as expected, the stock could potentially see higher highs.
Stocks to Buy on the Dip: McDonald’s (MCD)
Shares of the Golden Arches company outperformed the broader market in 2022, up 2% on the year as compared to a 17% decline in the S&P 500 index. McDonald’s (NYSE:MCD) is the type of reliable blue-chip stock that performs well in good times and bad. After all, people don’t stop eating at McDonald’s just because the economy is slowing down. The loyalty of McDonald’s customer base and its ability to raise prices without losing customers makes MCD stock a worthwhile long-term holding for investors.
Currently, MCD stock is trading at just under $272 a share, has a price-earnings ratio of 34, and carries a dividend yield of 2.21%. McDonald’s also continues to innovate and diversify its menu in an effort to attract and retain customers. In addition to popular promotions like a farewell tour for the McRib, McDonald’s also recently began selling double cheeseburgers for only 50 cents each. Now that’s a deal that has to appeal to consumers who’ve been struggling with inflation and high interest rates.
TJX Companies (TJX)
Discount clothing retailer TJX Companies (NYSE:TJX) is another hedge against a possible recession in 2023. The stock has already performed well over the past 12 months, having risen 4% to trade at $78 a share. While that gain might appear modest, it is a lot better than the performance of the overall market, and better than other clothing retailers such as The Gap (NYSE:GPS) and Levi Strauss & Co. (NYSE:LEVI) that are each down more than 25% in 2022.
The key to TJX’s resiliency has been its discounts on name brand products through its store chains that include T.J. Maxx, HomeGoods, Sierra, and Marshalls. Offering 20% to 60% off retailers’ regular prices, TJX Companies appeals to price conscious consumers, especially during times of financial strain such as now. TJX reported that its third quarter EPS rose 8.3% from a year ago to 91 cents. Analysts have forecast that the company’s EPS can grow more than 10% annually over the next five years. TJX stock has a decent price-earnings ratio of 27.5 and carries a dividend yield of 1.49%.
After being knocked down for most of the year, shares of semiconductor and microchip company Nvidia (NASDAQ:NVDA) look to be on the mend heading into 2023. Over the past six months, NVDA stock has gained 7% to trade at $176. That said, the share price is still down 41% from the start of 2022, providing a nice entry point for investors who want exposure to a cutting edge technology name.
The Santa Clara, California-based semiconductor company makes some of the most advanced chips in the world. Many of which are used to power supercomputers, artificial intelligence applications, video game consoles, and self-driving vehicles. Like other semiconductor companies, Nvidia has been hurt by supply chain bottlenecks and slowing demand for video game consoles coming out of the pandemic.
Nvidia’s most recent earnings were mixed with its revenue coming at $5.93 billion, which was above expectations for $5.77 billion. But its EPS clocked in at 58 cents, which was below forecasts for 69 cents. A price-earnings ratio of 75 looks high at first glance. However, it’s in line with similar companies. Nvidia also carries a small dividend yield of 0.09% at the moment.
Chipotle Mexican Grill (CMG)
Analysts, investors and consumers all continue to love Chipotle Mexican Grill (NYSE:CMG). The quick service restaurant chain that specializes in Mexican cuisine is another stock that has fared better than the overall market throughout 2022. CMG stock is down 10% over the past 12 months, better than the S&P 500 and many other restaurant securities. Like McDonald’s, Chipotle benefits from a loyal customer base and pricing power.
The company has also continued with its expansion plans despite the turmoil of the Covid-19 pandemic and inflationary environment that followed it. The Newport Beach, California-based company recently opened its 500th restaurant, with plenty more room to grow in existing and new markets, both in the U.S. and abroad. And even though it aggressively raised its prices this year, Chipotle managed to increase its comparable store sales by 7.6% in the third quarter, showing that consumers stick with the company through thick and thin.
CMG stock is not cheap at $1,487 per share and with a price-earnings ratio of just over 50. However, Chipotle is hard to beat for investors who are looking for long-term growth stocks. Plus, the company could finally execute the stock split that has long been rumored.
Disclosure: On the date of publication, Joel Baglole held long positions in GM and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.